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A federal court in Utah rejected a fraud in the inducement challenge to an arbitration agreement, finding that the allegations of fraud were neither pleaded with particularity nor sufficient to overcome the strong presumption in favor of arbitrability.
In CirTran Corp. v. Guthy-Renker Corp., No. 2:06-CV-543 TS, 2006 WL 3254470 (D. Utah Nov. 7, 2006), CirTran agreed to supply Guthy-Renker with fitness products. The parties’ agreement contained an arbitration clause, so when CirTran filed a lawsuit alleging breach of contract and other causes of action, Guthy-Renker filed a motion to compel arbitration. In opposing the motion, CirTran argued fraud in the inducement of the arbitration clause.
The Court granted the motion to compel arbitration because CirTran did “not set forth a well-founded claim, either within or without the pleadings, that the arbitration agreement resulted from fraud.” In claiming fraud in the inducement, CirTran alleged that (1) Guthy-Renker provided assurances that the arbitration provision would not come into play and (2) the designated arbitrator was bias because of business ties with Guthy-Renker. However, the Court found that those allegations were neither pleaded with requisite specificity nor sufficient to support a claim for fraud.
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